Updated: Nov 1
We all know that hiring the wrong person or losing a valuable member of staff comes at a cost. But have you ever sat down and calculated the actual true cost to your business. I guarantee the results will shock you!
If you operate in a competitive industry and your competitors offer comparable products or services - then, how do you grow your business? The easy solution is to cut your prices. However once you do this, there’s no going back and you risk triggering a price war with competitors that may have deeper pockets than you.
More often than not, the answer is standing right in front of you - it's the people who work for you.
Above all else, it’s the people you employ that can make the biggest difference to the results of your business. They can be your greatest asset or your biggest liability. You can have the best products and offer the very best service in the world, but without the right people working for you it can come to nothing.
Hire the wrong person or lose a good one and it's going to cost you and the cost is going to be much more that you think. That's because most companies only consider the direct cost and they forget or ignore the associated indirect costs. If you take these into consideration, you might do things differently. In a series of factual case studies, the combination of direct and indirect costs proved to be 4 to 5 times the annual salary of the position. So, lose a person on a wage of $50K per year - then the true cost to your business will be between $200 and $250K!
How is this possible?
Let me explain. First on the list are the direct costs - these are pretty obvious and easy to calculate. They include things like job advertising and recruitment fees, formal training and wages. But these are just the tip of the iceberg, and what's hidden are the indirect costs. Now, the indirect costs include the lost opportunity costs (missed sales or productivity loss). People take time to get up to speed and until they do you're business will incur a lost opportunity cost. Plus, it takes time to replace someone and during that time you will most likely miss sales opportunities and be less productive - also a loss opportunity cost. Plus the time spent providing on-the-job training, coaching and supervision. These are all actual costs but because they aren't as obvious as paying an invoice, they get forgotten. But make no mistake, they are real and they increase the cost of doing business.
Mitigate the Risk to Your Business
Hiring the right people for the job and getting them up and running as fast as possible makes good business sense. As does maximising their productivity and retaining them for as long as possible. If you are to achieve this, then you need to consider more than how you recruit new staff. You must also consider how you choose successful candidates, how you orientate them into your business and what you do to keep them from leaving and joining your competition.
Facts Worth Considering:
Most companies consider the job offer as the final step in the hiring process.
Studies have shown that changing jobs is one of the 4 most stressful experiences in life – the others are moving house, the death of a loved one and the breakdown of a relationship.
The first 4 to 8 weeks of a new job will influence how long a person stays, their work ethic, how well they align to the company culture and their overall contribution to the business.
'Sink or swim' is the most common orientation program for new employees.
New employees are rarely given a written set of clearly defined performance goals when starting a new job.
Even in a healthy company, one resignation can trigger an avalanche. That’s because it can cause others to think about new opportunities and the need for a change (the grass is greener on the other side of the fence).
7 STEPS to Mitigate Recruitment Risk
Drawing on experience and research, idResults identified 7 critical steps to mitigate the risks of making the wrong decision and minimise the potential cost to your business. They provide a structured approach for recruiting, selecting and retaining talented people and apply to every company, regardless of size. Each step can be scaled up or down to suit the position and needs of the business as can the time and effort required. Most importantly, they have proven to work.
Position Analysis - Combines a Position Description together with a Person Specification for the vacant position.
Recruitment Strategy - An agreed plan that considers the best way to find suitable candidates.
Structured Selection Process - A pre-set interview plan prepared using methods such as targeted selection with scored assessments for objectivity.
Reference & Criminal History Check - To safeguard company assets and your reputation.
Company Orientation/Induction - A list of activities (i.e. appointment time with key individuals) and selected documentation (forms and policies) that provide important information about the Company and help set new staff up with the knowledge they need to be successful.
Performance Management Plan - A document that details clearly defined and measurable goals to be achieved and an action plan that identifies and addresses any learning/training needs.
Mentoring - Using your top performers to help develop and grow others.
For more information on these, the tools that accompany each step or advice on how to implement these measures in your business, please contact idResults.
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